Taking Covered Wagons East a New Innovation Theory for Energy and Other Established Technology Sectors

William B. Bonvillian and Charles Weiss Taking Covered Wagons East A New Innovation Theory for Energy and Other Established Technology Sectors Frederick Jackson Turner, historian of the American frontier, argued that the always-beckoning frontier was the crucible shaping American society.1 He retold an old story, arguing that it defined our cultural landscape: when American settlers faced frustration and felt opportunities were limited, they could climb into covered wagons, push on over the next mountain chain, and open a new frontier. Even after the frontier officially closed in 1890, the nation retained more physical and social mobility than other societies. While historians debate the importance of Turner’s thesis, they still respect it. The American bent for technological advance shows a similar pattern. Typically, we find new technologies and turn them into innovations that open up new unoccupied territories—we take “covered wagon” technologies into new technology frontiers. Information technology is an example. Before computing arrived, there was nothing comparable: there were no mainframes, desktops, or Internet before we embarked on this innovation wave. IT landed in a relatively open technological frontier. This has been an important capability for the U.S. growth economics has made it clear that technological and related innovation is the predominant factor driv- ing of growth.2 The ability to land in new technological open fields has enabled the U.S. economy to dominate every major Kondratiev wave of worldwide innovation William B. Bonvillian directs MIT’s Washington office and was a Senior Adviser in the U.S. Senate. He teaches innovation policy on the Adjunct Faculty at Georgetown University. Charles Weiss is Distinguished Professor at Georgetown University’s Walsh School of Foreign Service, and formerly chaired its program in Science, Technology, and International Affairs. From 1971 to 1986, he was Science and Technology Adviser to the World Bank. In this article the authors draw on the more extensive discussions of their ideas in their new book, Structuring an Energy Technology Revolution (Cambridge, MA: MIT Press, April 2009). © 2009 William B. Bonvillian and Charles Weiss innovations / fall 2009 289 Downloaded from http://direct.mit.edu/itgg/article-pdf/4/4/289/705386/itgg.2009.4.4.289.pdf by guest on 28 September 2021 William B. Bonvillian and Charles Weiss since the mid-19th century. 3 Information technology and biotech are the newest chapters in this continuing story. REVERSING THE COVERED WAGONS: LANDING IN OCCUPIED TERRITORY While we appear to have a capacity for standing up technologies in open fields to form new complex technology sectors, we have not been as good at taking our covered wagons back east. We find it hard to go back over While we appear to have a the mountains to bring innovation into the already occu- capacity for standing up pied territory of established technologies in open fields to complex technology sectors. In typical American fashion, form new complex technology we’d rather move on than sectors, we have not been as move back. This helps to explain why a cab ride over good at taking our covered the highway system from New York’s Kennedy Airport into wagons back east. We find it Manhattan has a distinctly hard to go back over the Third World feel, or why Thomas Edison would be very mountains to bring innovation comfortable with our current into the already occupied electrical grid. Of course, the story is territory of established complex more complicated than technology sectors. In typical Turner’s frontier thesis about American culture. It’s hard to American fashion, we’d rather reverse the covered wagons move on than move back. and go back to occupied territory. Over time, established technology sectors develop characteristics that resist change. The underlying technologies themselves become cost efficient through standardization, and the phenomenon of “lock-in” sets in. Firms go through Darwinian evolution; the leading technology competitors survive, expand, and become adept at fending off new entrants. They build massive infrastructure that is resistant to competitive models, and they form alliances with government to obtain subsidies, typically through the tax system, to tilt the playing field toward their model. In other words, established complex sectors, often themselves the result of ear- lier waves of innovation, combine into a technological/economic/political para- 290 innovations / fall 2009 Downloaded from http://direct.mit.edu/itgg/article-pdf/4/4/289/705386/itgg.2009.4.4.289.pdf by guest on 28 September 2021 Taking Covered Wagons East digm that is very difficult to unseat;4 they plant a series of sophisticated minefields to protect their model and resist its disruption. This pattern applies to highly complex sectors of the economy where technologies are a factor; examples include energy, health care delivery, transport, construction, and physical infrastructure, education, and food and agriculture. A complex, established technology sector can be defined as one that involves products and platforms, that groups complex technologies in the way a car holds an internal combustion engine, drive train, battery, computers, fueling systems and tires. Complex sectors also have their own infrastructure, and are supported by established technologies, economic models, public policies, public expectations, patterns of technical expertise and trained work- forces. In combination, these sectors become the technological/economic/political paradigm. The concept of the complex sector is broader than that of complex technology introduced by Robert Rycroft and Donald Kash,5 and is closer to Christopher Freeman’s idea of technology clusters that dominate innovation waves.6 The idea of such a sector has features in common with the idea of “dominant design,”introduced by William Abernathy and James Utterbach7 and based on Raymond Vernon’s product cycle theory:8 once such a paradigm has set in, the emphasis shifts away from innovation in the overall system towards component innovation in technologies that can be launched on existing platforms. To be sure, the U.S. is not the only nation to experience the economic and political barriers of complex established sectors. Japan’s economy would be stronger if it could bring IT-driven retail efficiencies to a nation of small shops or to pursue large-scale agriculture, not simply small family farms. The frontier thesis aside, innovation in established complex sectors becomes even more complex once technological lock-in has set in. LESSON FROM CHINA The remarkable, sustained, double-digit growth of the Chinese economy is due in part to the application of up-to-date technology to established sectors like transport, health care, construction, and energy. Chinese strategy for catching up to the developed economies is based on a unique model that calls for moving to and even extending the technological frontier in these and other sectors, even as it applies well-known technology to huge projects that will modernize its infrastructure. It has organized its economy with large doses of capital, labor, innovation and stern political directives, relying on a rapidly expanding private sector using up-to-date technology to provide the resources to support an inefficient public sector that it will eventually supplant. China’s model of pervasive technology advance through- out its economy, of course, has a precedent. in the economy-wide catch-up approach in postwar Japan and in Korea in the 1970s and 1980s. There is a lesson here for the U.S. If innovation is key to growth, and if a nation is bringing innovation into many sectors—both established sectors and those at the technological frontier—then it may be able to boost its growth rate significant- innovations / fall 2009 291 Downloaded from http://direct.mit.edu/itgg/article-pdf/4/4/289/705386/itgg.2009.4.4.289.pdf by guest on 28 September 2021 William B. Bonvillian and Charles Weiss ly. U.S. growth might look different if we could find ways to cut the Gordian knots that tie up our ability to innovate in established complex technology sectors and bring innovation into those occupied territories, not just into the cutting economic edge of advances in new breakthrough technologies. This might mean bringing innovation into our inefficient and expensive healthcare delivery system, along with new biotech-derived drugs. It could mean bringing IT simulations and game-based learning into K-12 education, or new materials and information technology into our transportation or construction infrastructure, or e-government into the widespread delivery of government serv- ices. The list of possibilities is long. Perhaps we could even take our innovation covered wagon back east and bring innovation into our complex, deeply entrenched, heavily subsidized energy sector. UNIFYING THE THREE MODELS OF INNOVATION In order to contemplate stretching our scientific and technological capabilities to established sectors of the economy, like energy, we need a working theory of innovation for these sectors. Its design depends on a clear concept of how technological innovation takes place in the sectors in response to market forces, and how this process can be influenced by public policy. We see three models of this process, each of them the product of a particular period of technological history. The first of these models is the so-called pipeline or linear model, associated with Vannevar Bush,9 in which basic research intended to push back the frontiers of knowledge leads to applied research, which in turn leads to invention, to proto- typing, to development, and finally to innovation, by which we mean widespread commercialization or deployment. While subsequent literature showed that this process wasn’t really linear—technology influenced science as well as the other way around10—“pipeline” is still the term generally associated with this technology sup- ply approach.

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